The implementation of a financial transaction tax has had a disastrous effect on the countries that have implemented it, according to Financial Services Ireland.
Financial Services Ireland, an Ibec group that represents the financial services sector in Ireland, praised the Government for opting out of the financial transaction tax following the publication of a report by PricewaterhouseCoopers which found that the tax resulted in higher costs on households and businesses.
Director of Financial Services Ireland, Brendan Bruen, said that implementation of this type of tax, which is a levy on every financial transaction, would drive jobs out of Europe.
“It’s clear that Ireland made the right decision staying out of any financial transaction tax.
“The review shows that financial transaction taxes hurt every country that introduces one. In France, the tax raised less than half of what was predicted. Business simply disappeared or left the country,” Mr Bruen said.
“The same would happen if one was introduced across Europe — we would be actively driving jobs out of the EU.
“Whatever is raised by the tax is ultimately paid by the real economy, in increased costs for business, lost jobs and lost payroll and corporate taxes,” he said.
The PricewaterhouseCoopers report found that the implementation of the tax as it is currently designed by the European Commission — as a way to raise extra revenue and curb certain types of trading by making them prohibitively expensive — is having a negative impact and adding to costs.
“Households and non-financial businesses will be negatively affected by its imposition. Some have suggested this could translate into adverse effects on pensions and impairment of the risk-management capability of businesses,” the report noted.
The report cited a research paper from 2011 by Worstall T, entitled ‘The case against the financial transaction tax,’ which said it would be the consumer who would bear the brunt of the cost.
“Those who carry the economic burden of the financial transaction tax would not be the banks but workers and consumers in general, and their burden would be more than 100% of the revenue raised by the financial transaction tax,” Worstall argued.
Outside of the purely financial aspects of the tax, there is a danger that financial services jobs could move to other jurisdictions.
“In its current form it has also been suggested that the proposal may generate adverse extra-territorial effects for non-participating jurisdictions, such as influencing the cost of funding for foreign and corporate issuers of debt or by influencing the location of financial activity,” the report noted.
The PricewaterhouseCoopers report also pointed to the experience of Sweden which eventually scrapped the tax it had implemented following the significant negative impacts it experienced as a direct result.
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